fixed exchange rate

(redirected from Pegged rate)

Fixed exchange rate

A country's decision to tie the value of its currency to another country's currency, gold (or another commodity), or a basket of currencies.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Fixed Exchange Rate

An exchange rate for a currency where the government has decided to link the value to another currency or to some valuable commodity like gold. For example, under the Bretton Woods System, most world currencies fixed themselves to the U.S. dollar, which in turn fixed itself to gold. A government may fix its currency by holding reserves of the peg (or the asset to which it is fixed) in the central bank. For example, if a country fixes its currency to the British pound, it must hold enough pounds in reserve to account for all of its currency in circulation. Importantly, fixed exchange rates do not change according to market conditions. It is also called a pegged exchange rate.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

fixed exchange rate

An exchange rate between currencies that is set by the governments involved rather than being allowed to fluctuate freely with market forces. In order to keep currencies trading at the prescribed levels, government monetary authorities actively enter the currency markets to buy and sell according to variations in supply and demand. Compare floating exchange rate. See also devaluation.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
While Qatar keeps its currency pegged at a fixed rate to the dollar, an economic boycott by its neighbours last June saw the riyal trade several percent weaker than its pegged rate of 3.64 per dollar in offshore markets.
dollar at its pegged rate for the foreseeable future, the Central Bank governor said Tuesday.
This summer, facing liquidity issues and an increasing black market for the naira, the Central Bank of Nigeria floated the currency, also sparking a dramatic depreciation, from the pegged rate of NGN 197/$ to a current low of NGN 365/$.
With a pegged rate, the monetary base contains both domestic and foreign components.
Sweden abandoned the pegged rate in November 1992, obtaining a lasting depreciation of its currency that contributed to a prolonged recovery.
Such regime exerts pressures on Oman's monetary policy framework to maintain the pegged rate and to manage domestic liquidity.
That means that the Swiss will defend the pegged rate of exchange by printing enough francs to offset the inflows of euros.
For instance, trading partner GDP would rise to [Y*.sub.2] and both consumption and investment spending would fall compared with the pegged rate outcome such that, collectively, trading partner output would equal expenditure, and current accounts with China would balance.
The Norwegian krone was taken of its pegged rate in December 1992.
I would say you should have a unified currency as the best solution, with a floating rate as a second-best solution and a pegged rate as very much worse than either.
At the forefront of such efforts were the gradual steps taken to reduce regulation in foreign exchange market by moving away from a pegged rate system to a flexible rate system.
dollar from its pegged rate of 3.8 since the central bank lifted the seven-year old peg to the dollar and switched to a managed float July 21.